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Our new bank-based oligarchy


{Politics.940.49}: The next big bubble to pop {cardo} Tue, 22 Jul 2014 09:45:59 EDT (HTML)

In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates

"Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan.

“I am not sure how I got the loan,” Mr. Durham, age 60, said.

Mr. Durham’s application said that he made $35,000 as a technician at Lourdes Hospital in Binghamton, N.Y., according to a copy of the loan document. But he says he told the dealer he hadn’t worked at the hospital for more than three decades. Now, after months of Wells Fargo pressing him over missed payments, the bank has repossessed his car.

This is the face of the new subprime boom. Mr. Durham is one of millions of Americans with shoddy credit who are easily obtaining auto loans from used-car dealers, including some who fabricate or ignore borrowers’ abilities to repay. The loans often come with terms that take advantage of the most desperate, least financially sophisticated customers. The surge in lending and the lack of caution resemble the frenzied subprime mortgage market before its implosion set off the 2008 financial crisis.

Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scores at or below 640.

The explosive growth is being driven by some of the same dynamics that were at work in subprime mortgages. A wave of money is pouring into subprime autos, as the high rates and steady profits of the loans attract investors. Just as Wall Street stoked the boom in mortgages, some of the nation’s biggest banks and private equity firms are feeding the growth in subprime auto loans by investing in lenders and making money available for loans.

And, like subprime mortgages before the financial crisis, many subprime auto loans are bundled into complex bonds and sold as securities by banks to insurance companies, mutual funds and public pension funds — a process that creates ever-greater demand for loans."



{Politics.940.50}: Richard Clark {cardo} Tue, 22 Jul 2014 09:49:22 EDT (HTML)

And how much damage to the economy will be done when _this_ bubble pops?

So, Liz and Steve, should banks be stopped from bundling subprime auto loans into complex bonds and sold as securities to suckers?

Please answer this question for us.


{Politics.940.51}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 10:32:22 EDT (HTML)

No. Used car dealers should be made responsible for faked up deals they send to the banks. A people who can't afford cars should be made to ride the buses or trains like those yahoos in currents.


{Politics.940.52}: Tom Austin {taustin} Tue, 22 Jul 2014 10:39:25 EDT (5 lines)

The banks should be made responsible as well.  If they don't want to loan
money to people who can't pay back their loans, they shouldn't loan out
that money.  And they CERTAINLY shouldn't securitize those bad loans and
pawn them off on the suckers- er, I mean customers - of the brokerage side
of their business.


{Politics.940.53}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 11:03:07 EDT (HTML)

Start where it starts and there won't be a problem.


{Politics.940.54}: Tom Austin {taustin} Tue, 22 Jul 2014 11:27:25 EDT (1 line)

it starts with banks.  it ALWAYS starts with banks.


{Politics.940.55}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 12:50:19 EDT (HTML)

It starts with the used car dealer and the customers that shop there.


{Politics.940.56}: Tom Austin {taustin} Tue, 22 Jul 2014 12:53:40 EDT (1 line)

And the banks are just helpless victims.  As always.


{Politics.940.57}: {doorman} Tue, 22 Jul 2014 13:35:36 EDT (2 lines)

The banks do not HAVE to underwrite those loans for cars.  They do it
to for the interest and the income statement.


{Politics.940.58}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 13:40:08 EDT (HTML)

The banks cover their bets so used car dealers can continue making bad bets without repercussions. That is the problem. Stop the car dealers from fraud (and ultimately the buyer who has no business buying a car they can't afford) and the bank problem is solved.

The government is happy to pick up the expense of bus and train service at a terrible loss to service those who want to subsidize their train instead of paying for parking and to provide a reliable method of wasting a day getting around for those who can't afford a car.


{Politics.940.59}: Tonu Aun {tonu} Tue, 22 Jul 2014 13:51:06 EDT (3 lines)

The dealers don't have the capital to hold onto the loans so pass them
to the banks who have finagled a 'legal' way to sell them, regardless
of worth, on to greater fools. Is the dealer the bigger pimp?


{Politics.940.60}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 14:40:39 EDT (HTML)

>Is the dealer the bigger pimp?<



{Politics.940.61}: Tonu Aun {tonu} Tue, 22 Jul 2014 14:44:26 EDT (2 lines)

Why? If the banks hadn't created a way for them to offload then they
couldn't use crap loans to sell cars.


{Politics.940.62}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 14:48:42 EDT (HTML)

There would not be a crap loan if dealers didn't knowingly take crap loans.


{Politics.940.63}: Tonu Aun {tonu} Tue, 22 Jul 2014 14:56:11 EDT (5 lines)

So you are absolving the banks from taking bad loans from the dealers?
-- loans they can pass through with a profit? Seems that both the
dealers and the banks are complicit but the banks can easily stop the
dealers while the dealers can't stop the bankers. Accountability rests
with responsibility does it not?


{Politics.940.64}: {doorman} Tue, 22 Jul 2014 15:50:20 EDT (2 lines)

Who looks at the credit rating of the borrower?  Your not being
straight here, Steve.


{Politics.940.65}: Tom Austin {taustin} Tue, 22 Jul 2014 15:59:41 EDT (2 lines)

They aren't crap loans to the dealers unless the dealers are on the hook
for bad loans.  And they're not.  That's because dealers are not banks.


{Politics.940.66}: The whole story in a nutshell {cardo} Tue, 22 Jul 2014 20:16:23 EDT (HTML)

Once the banks buy, package and securitize the loans that have been made to people with bad credit and no job, and then pay a rating agency to mark these securities as triple-A, they can be sold to suckers all over the world, who apparently haven't learned a thing from the last crisis. Once the banks package and sell these dicey loan packages to investors, the banks are home free and are no longer responsible in the event that the buyer of one of these cars can no longer afford to make the jacked-up payments on the loan. And as long as banks are willing to pay a fairly good price for these dodgey loans, car dealers are gonna keep selling cars to people with no credit and no job, albeit with sky-high interest rates on the loans (which enables the banks to offer equally higher rates on the securities they sell to suckers).

You do agree with all that, so far, don't you Steve?


{Politics.940.67}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 20:31:11 EDT (HTML)

>So you are absolving the banks from taking bad loans from the dealers?<

I recognize the viper cannot change his stripes.

To be more clear, the used car dealer in this case knew the man had not worked at his listed job for a decade. So did the man, who also couldn't believe the dealer got him a loan. Both these clowns are corrupt in their dealings. The bank takes the paperwork as it is and makes the loan.

The criminal activity of fraud began at the showroom floor.


{Politics.940.68}: Elizabeth Costello {lizcostello} Tue, 22 Jul 2014 20:44:24 EDT (1 line)

It all sounds so Fannie and Freddie


{Politics.940.69}: Senator Lampoon {yesdeer} Tue, 22 Jul 2014 21:47:02 EDT (HTML)

Richard thinks the victims are the poor saps who buy these worthless instruments the bank packages off and sells to them when in reality, they are the same 1% folks Richard wants to rip off with his neo- liberal fascist predatory taxing.

What's the problem? Richard doesn't know that his fantasy world is already real. The poor credit risk man gets to drive a car until it's repossessed, probably a year or so, the car dealer gets paid, and the bank and the 1% get ripped off. The government doesn't even have to get involved in this natural selection distribution of wealth.

Richard, time to shut the fuck up, you old fart whiner.


{Politics.940.70}: Tom Austin {taustin} Tue, 22 Jul 2014 23:50:57 EDT (7 lines)

 The bank takes the paperwork as it is and makes the loan.

Really?  Is that all a bank does?  They're like, glorified clerks or
something?  That must be why all those MBA's go to work for car dealers
and not banks, huh.


{Politics.940.71}: Richard Clark {cardo} Wed, 23 Jul 2014 03:22:21 EDT (HTML)

The banks do a lot more than paperwork, as Tom suggests. What they've been doing is setting up a scheme whereby car dealers are seduced into setting up loans they (and the banks) know will never be repaid (because of the joblessness and poor credit of the people to whom the loans are extended). Then, as soon as the packaged and securitized loans are sold off to sucker-investors, both the banks and the car dealers are free and clear of any possible financial-legal obligations. This is, of course, a racket that has been set up by banks working in cooperation with their accomplices, the car dealers, all of which conniving takes place by way of the negligence of the government, which should have (but doesn't have) well enforced regulations and regulators in place to nip this crap in the bud.

So now, when the whole house of cards collapses, as a critical mass of those with dicey auto loans skip out on their payments (because of a recession that takes many of their jobs away), and the banks have yet to unload thousands of these 'securities,' now nearly worthless, our government will once again be expected to bail out both the banks and any insurance companies that have provided way too many insurance policies to investors who have invested in these crap securities that have now become nearly worthless. These dopey investors will now place their claims on the insurance companies which will, once again, have nowhere near enough capital to pay-off on all these insurance policies they've issued, and so they will need to be bailed out by the US taxpayer, same as last time.

How could all this have been avoided? Simple: By having enough well thought out regulations in place as well as the watchdog regulators/enforcers necessary to make sure the regulations are enforced. Problem is Republicans and BlueDogs don't like too many regulations and regulators, and receive campaign contributions from their wealthy bankster/business constituents in proportion to how well all such regulations are either defeated or kept to a minimum.


{Politics.940.72}: Glen Marks {wotan} Mon, 27 Oct 2014 07:50:33 EDT (5 lines)

- And remember, where you have a concentration of power in a few hands,
all too frequently men with the mentality of gangsters get control.
History has proven that.

Lord Acton


{Politics.940.73}: Glen Marks {wotan} Mon, 27 Oct 2014 07:51:23 EDT (4 lines)

- The issue which has swept down the centuries and which will have to be
fought sooner or later is the people versus the banks.

Lord Acton


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